[Federal Register Volume 88, Number 230 (Friday, December 1, 2023)]
[Proposed Rules]
[Pages 83887-83889]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-26393]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3050

[Docket No. RM2024-2; Order No. 6816]


Periodic Reporting

AGENCY: Postal Regulatory Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Commission is acknowledging a recent filing requesting the 
Commission initiate a rulemaking proceeding to consider changes to 
analytical principles relating to periodic reports (Proposal Eight). 
This document informs the public of the filing, invites public comment, 
and takes other administrative steps.

DATES: Comments are due: January 18, 2024.

ADDRESSES: Submit comments electronically via the Commission's Filing 
Online system at http://www.prc.gov. Those who cannot submit comments 
electronically should contact the person identified in the FOR FURTHER 
INFORMATION CONTACT section by telephone for advice on filing 
alternatives.

FOR FURTHER INFORMATION CONTACT: David A. Trissell, General Counsel, at 
202-789-6820.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Introduction
II. Proposal Eight
III. Notice and Comment
IV. Ordering Paragraphs

I. Introduction

    On November 21, 2023, the Postal Service filed a petition pursuant 
to 39 CFR 3050.11 requesting that the Commission initiate a rulemaking 
proceeding to consider changes to analytical principles relating to 
periodic reports.\1\ The Petition identifies the proposed analytical 
changes filed in this docket as Proposal Eight.
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    \1\ Petition of the United States Postal Service for the 
Initiation of a Proceeding to Consider Proposed Changes in 
Analytical Principles (Proposal Eight), November 21, 2023 
(Petition). Proposal Eight is attached to the Petition. The Petition 
was accompanied by a study supporting its proposal. See Michael D. 
Bradley, Calculating the Rural Carrier Product Costs Arising Under 
the New Evaluation System, November 21, 2023 (Bradley Study). The 
Postal Service also filed a notice of filing of public and non-
public materials relating to Proposal Eight. Notice of Filing of 
USPS-RM2024-2-1 and USPS-RM2024-2-NP1 and Application for Nonpublic 
Treatment, November 21, 2023.
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II. Proposal Eight

    Background. In May 2023, the Postal Service began using a new route 
evaluation system, the Rural Route Evaluated Compensation System 
(RRECS), to determine each route's evaluated time, on which basis the 
compensation for rural carriers is based. Petition, Proposal Eight at 
1. The Postal Service states that RRECS replaces the previous route 
evaluation system and is materially different from the previous system 
in three important ways. Id. at 1-2. First, RRECS presents a more 
detailed classification of daily carrier activities and can potentially 
identify new linkages between rural carrier volumes and rural carrier 
costs. Id. at 2. Second, RRECS uses engineering and statistical methods 
instead of negotiated standards to establish time standards for 
individual rural carrier activities, which may lead to different volume 
variable costs. Id. Third, RRECS uses current data to determine the 
various counts that are applied to the time standards to determine 
evaluated time, unlike the existing methodology that relies on a 
special study (the Rural Mail Count) last conducted in 2018 to capture 
those counts. Id. The Postal Service concludes that because of these 
differences, it is likely that the relationship between rural carrier 
costs and volumes has changed, and changes to the existing methodology 
are required to accurately measure attributable rural carrier costs. 
Id.
    Proposal. Before describing the proposal, the Postal Service notes 
that a more detailed discussion of the research supporting the proposal 
is provided in the Bradley Study, and supporting data are provided in 
Library References USPS-RM2024-2-1 and USPS-RM2024-2-NP1. Id. at 3.
    The Postal Service states that because RRECS links actual volumes 
to actual rural carrier compensation, it is appropriate to use RRECS 
data to measure the variability of rural carrier costs and to 
distribute attributable costs to products. Id. The Postal Service 
explains that although the existing methodology has a solid casual 
basis, its implementation is dated. Id. at 4. First, it relies on Form 
4241 negotiated evaluation factors, which are no longer used and do not 
reflect the current relationships between volume and rural carrier 
cost. Id. Second, it relies on volumes from the Rural Mail Count 
conducted in 2018, and there have been material volume shifts since 
then. Id.
    The Postal Service states that updating the existing methodology 
using data from RRECS also provides two advantages for calculating 
attributable costs. Id. First, RRECS captures volume from ongoing 
operational data systems, and volume counts will be automatically 
updated each year and will no longer depend on

[[Page 83888]]

a special volume study. Id. at 4-5. Second, RRECS provides a more 
detailed description of rural carrier activities and reflects how rural 
carrier operations are currently performed. Id. at 5.
    The Postal Service states that RRECS has three types of variables 
that are used in calculating volume variable rural carrier costs. Id. 
First, it has time standards, which are the scientifically derived 
evaluation times specified for each carrier activity. Id. Second, it 
has units, which are a count of the activity that causes the carrier to 
incur time. Id. Third, it has time sequences, which are a measure of 
time spent in a specific activity. Id. The Postal Service states that 
for nearly all the time sequences, the calculated time is the product 
of the time standard for the activity and the number of units for the 
activity. Id.\2\
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    \2\ The Postal Service notes that there are three activities 
that are sufficiently heterogenous across routes that effective time 
standards could not be established. Id., n.1. These activities are 
loading the vehicle, deviations for Priority Mail Express 
deliveries, and end of shift activities. Id. For these three 
activities, the actual time the carrier spends is recorded on the 
carrier's Mobile Delivery Device. Id.
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    The Postal Service states that updating the existing methodology 
using RRECS data requires identifying the RRECS sequences that are 
volume variable. Id. at 6. This requires examining the relationship 
between volume and evaluated time for each of the sequences that make 
up the carrier's day. Id. First, this requires examining, for each 
sequence, the relationship between the cost driver (measured by the 
sequence's unit) and the sequence's evaluated time. Id. Second, this 
requires examining the relationship between volume and the sequence's 
unit. Id. The Postal Service concludes that a sequence is volume 
variable if both the linkage between volume and its unit, and the 
linkage between its unit and its evaluated time, are in force. Id. On 
the other hand, if a sequence's unit is not volume dependent, then the 
sequence is not volume variable. Id.
    The Postal Service states that there are a total of 98 sequences 
and subsequences that make up the carrier's day. Id. Based on its 
analysis, the Postal Service concludes that among these sequences and 
subsequences, there are 48 that are entirely volume variable, 16 that 
are partially volume variable, and 34 that are not volume variable. Id. 
at 6-7.
    The Postal Service states that the overall variability for rural 
carrier labor time is calculated as the ratio of total volume variable 
evaluated time to total evaluated time. Id. at 7. Under the existing 
methodology, the overall variability for labor time is 39.0 percent. 
Id. Using 2023 data from RRECS, the overall variability is 47.2 
percent. Id.
    The Postal Service explains that the higher overall variability 
under RRECS is due to three reasons. Id. First, box time is volume 
variable under RRECS but not under the existing methodology. Id. The 
Postal Service states that total box time is a large time sequence and 
is the largest volume variable sequence under RRECS. Id. Second, under 
RRECS rural carriers get credit for verifying the addresses of mail as 
it is delivered. Id. at 7-8. Because this activity occurs at every box 
that receives mail, this makes it the second largest volume variable 
sequence under RRECS, whereas under the existing methodology this time 
is implicit in the non-volume variable box time. Id. at 8. Third, RRECS 
has a much more detailed examination of rural carriers' activities, 
leading it to identify higher time standards for handing mail, 
especially for parcels. Id. The Postal Service states that because of 
the growth in parcel volume, these additional parcel-related activities 
represent the third through the fifth largest volume variable sequences 
under RRECS. Id.
    The Postal Service states that the last step in the calculation of 
attributable rural carrier costs is the distribution of volume variable 
costs to the products that cause them. Id. This requires aligning RRECS 
cost pools with the distribution keys in the Rural Carrier Cost System 
(RCCS). Id. The Postal Service states that in some cases, this requires 
combining RRECS cost pools that share a common RCCS distribution key, 
and in others it requires subdividing an RRECS cost pool into shapes-
specific sub-pools that match RCCS distribution keys. Id.
    The Postal Service further proposes minor modifications to the RCCS 
distribution keys in order to realign rural carrier costing with RRECS. 
Id. The Postal Service states that these modifications ``are related to 
the shape of the mail piece, the presence of delivery barcodes, and the 
delivery location.'' Id. at 13. The Postal Service further states that 
these modifications ``would result in the addition of new distribution 
keys, the removals of obsolete distribution keys, and in changes in the 
assignment of mail pieces to the distribution keys.'' Id; see 
generally, id. at 13-16 (describing the minor modifications in detail).
    Impact. The Postal Service presents the impact of using RRECS data 
on the volume variable costs by product groups and the impact on unit 
costs by product in two tables.\3\ In terms of the impact on volume 
variable costs, the Postal Service states that the most notable impact 
is the large increase in volume variable costs for both Package 
Services and Competitive products. Id. at 9. The Postal Services 
explains that this is due to the higher parcel-shaped volumes recorded 
in RRECS as compared to the 2018 Rural Mail Count, and the higher 
carrier time per parcel identified under RRECS as compared to the 
negotiated time from Form 4241. Id.
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    \3\ See id. at 10, Table 1, Assessing the Impact of RRECS on FY 
2022 Volume Variable Costs by Product Groups (Thousands of Dollars); 
see also id. at 12, Table 2, Changes in Unit Costs Due to Switch to 
RRECS.
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    In terms of the impact on unit costs, the Postal Service states 
there are relatively small changes in unit costs for First-Class Mail 
products and Marketing Mail products (except for parcels), Periodicals' 
unit costs decrease because of the decline in rural route flats volume, 
Package Services' and Competitive products' unit costs increase because 
of higher parcel volumes and higher evaluated times per parcel in 
RRECS, and special services' unit costs decrease because of lower 
volumes and lower unit times in RRECS. Id. at 10-11.
    The Postal Service concludes that ``the impact analysis 
demonstrates that the proposed costing methodology produces volume 
variable and unit costs consistent with the changes in volume since 
2018 and the change in the route evaluation structure brought on by 
RRECS.'' Id. at 11.

III. Notice and Comment

    The Commission establishes Docket No. RM2024-2 for consideration of 
matters raised by the Petition. More information on the Petition may be 
accessed via the Commission's website at http://www.prc.gov. Interested 
persons may submit comments on the Petition and Proposal Eight no later 
than January 18, 2024. Pursuant to 39 U.S.C. 505, Nikki Brendemuehl is 
designated as an officer of the Commission (Public Representative) to 
represent the interests of the general public in this proceeding.

IV. Ordering Paragraphs

    It is ordered:
    1. The Commission establishes Docket No. RM2024-2 for consideration 
of the matters raised by the Petition of the United States Postal 
Service for the Initiation of a Proceeding to Consider Proposed Changes 
in Analytical Principles (Proposal Eight), filed November 21, 2023.

[[Page 83889]]

    2. Comments by interested persons in this proceeding are due no 
later than January 18, 2024.
    3. Pursuant to 39 U.S.C. 505, the Commission appoints Nikki 
Brendemuehl to serve as an officer of the Commission (Public 
Representative) to represent the interests of the general public in 
this docket.
    4. The Secretary shall arrange for the publication of this Order in 
the Federal Register.

    By the Commission.
Erica A. Barker,
Secretary.
[FR Doc. 2023-26393 Filed 11-30-23; 8:45 am]
BILLING CODE 7710-FW-P